Assessing Sustainable Development Impacts of Investment Incentives

The guide outlines a multi-level analysis framework to evaluate investment incentives, focusing on value for money, job quality, environmental protection, and policy transparency. It emphasizes the need for ex post assessments and the preservation of policy space for host governments to impose performance requirements on investors.

• Investment incentives often fail to create the number of jobs they claim; research from the United States indicates that less than 10% of apparent jobs were actually caused by the incentive rather than occurring regardless of the subsidy.
• The use of investment incentives by one country can divert investment from neighboring countries, making regional agreements on incentive use a desirable solution to prevent such competition.
• Regulatory incentives, which exempt investors from existing environmental or labor regulations, are identified as a significant risk to a project's sustainability and typically reduce the overall benefits of the investment.
• Subnational competition for investment can lead to 'bidding wars' that diminish national benefits; while Canada limits this by prohibiting cities from offering incentives, countries like Brazil, China, and India have seen an increase in such competition due to decentralization.
• Transparency in the subsidy process is critical to prevent corporate rent-seeking, bribery, and corruption, and to ensure that good policy emerges through stakeholder scrutiny.
• International investment agreements, such as bilateral investment treaties (BITs) and free-trade agreements (FTAs), can negatively impact sustainable development if they restrict a host government's ability to set performance requirements for investors.
• Ex post assessments are essential for determining program efficiency; for example, Vietnam discovered that corporate tax incentives for extractive industries were unnecessary because government royalties were already very low.

APA

Thomas, K. P. (2009). Assessing Sustainable Development Impacts of Investment Incentives. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/assessing_sd_investment.pdf

Chicago

Thomas, Kenneth P. Assessing Sustainable Development Impacts of Investment Incentives. International Institute for Sustainable Development, 2009. https://www.iisd.org/system/files/publications/assessing_sd_investment.pdf.

Wikipedia

{{cite report |last1=Thomas |first1=Kenneth P. |title=Assessing Sustainable Development Impacts of Investment Incentives |publisher=International Institute for Sustainable Development |date=2009 |url=https://www.iisd.org/system/files/publications/assessing_sd_investment.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{thomas2009assessing, author = {Thomas, Kenneth P.}, title = {{Assessing Sustainable Development Impacts of Investment Incentives}}, institution = {International Institute for Sustainable Development}, year = {2009}, url = {https://www.iisd.org/system/files/publications/assessing_sd_investment.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }